November 22, 2014
A slippery slope
The bill to repatriate bond swap jurisdiction obviously places the ball in the court of an opposition which has been generally slow to react (as yesterday’s editorial concluded, the opposition is effectively trapped by the either/or proposition of “Homeland or vultures” unless they can come up with a better alternative than pursuing dead-end negotiations with Manhattan judge Thomas Griesa and the hedge fund holdouts) — rather less obvious is the challenge also faced by the government. Paradoxically enough, this issue which has so helped the Cristina Fernández de Kirchner administration to snap out of being a lame-duck presidency might ultimately doom it to becoming precisely that. How? Because being onto a winner in this clash with voracious vulture funds and an inadmissible judge could so easily tempt this administration into wrapping itself up in the flag, politicizing all economic policy and taking its eye off the ball of the real economy, allowing its slide to continue. Here the likeliest outcome would be not so much a Rodrigazo or a replay of the 2001 meltdown as the slow but irreversible loss of credibility of the last years of the 1989-99 Carlos Menem presidency (although not so irreversible as to prevent Menem from being the leading candidate in a fragmented 2003 presidential vote with 24 percent — an electoral performance which Kirchnerism would probably more than equal, even in the worst of scenarios).
Should the government decide to correct its course, its options are by no means limited to capitulating to opposition recommendations — going back to its own basics would make much more sense, those early years of Kirchnerism described as “ordinary people doing extraordinary things” by a previous United States ambassador (from the days there was one). This would require the admission that if Kirchnerism was doing almost everything right before the 2011 landslide, it has been doing almost everything wrong since then (a debacle for which the former domestic trade secretary appointed by CFK Guillermo Moreno has much to answer). For a government with little more than 15 months left in office, there might well be more point in looking back than ahead.
Nevertheless, returning to basics should mean rather more than trying to put the clock back and reversing (or at least reviewing) all the counterproductive state interventions of the last three years. For once the important should take priority over the urgent and this default crisis would be a very good test case to see if the outgoing CFK administration has the vision and maturity for that.